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NEW RECRUIT

There’s no easy way to say this, so I’ll just say it: We’re no longer No. 1. Today, we’re No. 2. Yes, it’s official. The Chinese economy just overtook the United States economy to become the largest in the world. For the first time since Ulysses S. Grant was president, America is not the leading economic power on the planet.

It just happened — and almost nobody noticed.

The International Monetary Fund recently released the latest numbers for the world economy. And when you measure national economic output in “real” terms of goods and services, China will this year produce $17.6 trillion — compared with $17.4 trillion for the U.S.A.

As recently as 2000, we produced nearly three times as much as the Chinese.

To put the numbers slightly differently, China now accounts for 16.5% of the global economy when measured in real purchasing-power terms, compared with 16.3% for the U.S.

This latest economic earthquake follows the development last year when China surpassed the U.S. for the first time in terms of global trade.

I reported on this looming development over two years ago, but the moment came sooner than I or anyone else had predicted. China’s recent decision to bring gross domestic product calculations in line with international standards has revealed activity that had previously gone uncounted.

These calculations are based on a well-established and widely used economic measure known as purchasing-power parity (or PPP), which measures the actual output as opposed to fluctuations in exchange rates. So a Starbucks venti Frappucino served in Beijing counts the same as a venti Frappucino served in Minneapolis, regardless of what happens to be going on among foreign-exchange traders.

PPP is the real way of comparing economies. It is one reported by the IMF and was, for example, the one used by McKinsey & Co. consultants back in the 1990s when they undertook a study of economic productivity on behalf of the British government.

Yes, when you look at mere international exchange rates, the U.S. economy remains bigger than that of China, allegedly by almost 70%. But such measures, although they are widely followed, are largely meaningless. Does the U.S. economy really shrink if the dollar falls 10% on international currency markets? Does the recent plunge in the yen mean the Japanese economy is vanishing before our eyes?

Back in 2012, when I first reported on these figures, the IMF tried to challenge the importance of PPP. I was not surprised. It is not in anyone’s interest at the IMF that people in the Western world start focusing too much on the sheer extent of China’s power. But the PPP data come from the IMF, not from me. And it is noteworthy that when the IMF’s official World Economic Outlook compares countries by their share of world output, it does so using PPP.

Yes, all statistics are open to various quibbles. It is perfectly possible China’s latest numbers overstate output — or understate them. That may also be true of U.S. GDP figures. But the IMF data are the best we have.

Make no mistake: This is a geopolitical earthquake with a high reading on the Richter scale. Throughout history, political and military power have always depended on economic power. Britain was the workshop of the world before she ruled the waves. And it was Britain’s relative economic decline that preceded the collapse of her power. And it was a similar story with previous hegemonic powers such as France and Spain.

This will not change anything tomorrow or next week, but it will change almost everything in the longer term. We have lived in a world dominated by the U.S. since at least 1945 and, in many ways, since the late 19th century. And we have lived for 200 years — since the Battle of Waterloo in 1815 — in a world dominated by two reasonably democratic, constitutional countries in Great Britain and the U.S.A. For all their flaws, the two countries have been in the vanguard worldwide in terms of civil liberties, democratic processes and constitutional rights.

SENIOR MEMBER

The US lost it big time, almost everything nowadays is made in china. You can actually tell that China economy has emerged as number one in the world. The US has the highest deficit rate in the world while China occupying the fourth place in term of surplus.

NEW RECRUIT

The US lost it big time, almost everything nowadays is made in china. You can actually tell that China economy has emerged as number one in the world. The US has the highest deficit rate in the world while China occupying the fourth place in term of surplus.

Absolutely. The same fate as the Soviet Union is awaiting the US, Their national debt has past the $18 trillion mark, no economy can survive that, And imagine if tomorrow we decided to sell our oil with a currency other than the Dollar? each and every state of their 50 states will start declaring their independence, not to mention that each state has its own armed militias, so if their economy collapsed = their military will collapse = eventually the whole country will collapse.

SENIOR MEMBER

Absolutely. The same fate as the Soviet Union is awaiting the US, Their national debt has past the $18 trillion mark, no economy can survive that, And imagine if tomorrow we decided to sell our oil with a currency other than the Dollar? each and every state of their 50 states will start declaring their independence, not to mention that each state has its own armed militias, so if their economy collapsed = their military will collapse = eventually the whole country will collapse.

What the hell! I never knew about that. Militias and separatists in the US. That is some stuff right there man. You just opened my eye to something I'v never thought of. I found it very interesting, I think I should read more about.

The US has got itself in the mud, now its very difficult to regain its economic position in the world unless they scarifies their military and politics policies which will open the door for Russia to take the lead.

MEMBER

What the hell! I never knew about that. Militias and separatists in the US. That is some stuff right there man. You just opened my eye to something I'v never thought of. I found it very interesting, I think I should read more about.

The US has got itself in the mud, now its very difficult to regain its economic position in the world unless they scarifies their military and politics policies which will open the door for Russia to take the lead.

Russia is a mess. Don't think they will ever surpass the US. China was forecast to do just that. They just did it earlier than expected. The Russian economy is fueled by black money from rogue terrorist groups who buy Russian weapons and technology. Any country that has to rely on funding from militants in the Middle East is no threat to the US economically.

MEMBER

The Chinese are a well oiled machine. Communism (I can't believe I am saying it) has been a huge factor in that country's success. I expect the US to drop to number three if India can get its population under control.

SENIOR MEMBER

Russia is a mess. Don't think they will ever surpass the US. China was forecast to do just that. They just did it earlier than expected. The Russian economy is fueled by black money from rogue terrorist groups who buy Russian weapons and technology. Any country that has to rely on funding from militants in the Middle East is no threat to the US economically.

Now I must agree with you especially after Saudi Arabia bright oil prices down to $50 pb and also the sanctions imposed on Russia by the US and the European unions have made the vodka addicts spinning around themselves. I wish that will push Russia to abandon Syria and Ukraine.

NEW RECRUIT

I for one am not surprised at all. I have heard rumors that China has been slowly gaining strength in the past years, and looks like the time has come. I have no idea what America can do to regain economic strength but its going to be hard. Interesting to see Communism make a comeback, for the better or worse.

SENIOR MEMBER

I for one am not surprised at all. I have heard rumors that China has been slowly gaining strength in the past years, and looks like the time has come. I have no idea what America can do to regain economic strength but its going to be hard. Interesting to see Communism make a comeback, for the better or worse.

The Chinese are working slowly but steady and have so far manage to stand on their feet in term of economy. The US need a reformer who can bring the US back to the economic arena. China need about twenty years or so to surpass the US. The question is would the US allow that to happen or not?

MEMBER

I think china has done well for itself, and has done well in a financial sense, and has reached number 1 in a short time and no one noticed them doing this which is surprising. I wander what else, they will do to show their country has moved forward with time and the wages are good over there for the people to survive. America needs to have a good economy, one where everyone get's wages which they can survive on which has been a problem there for a long time. A new government is needed one with changes for the economy, and also one which makes economy etter.

SENIOR MEMBER

I think china has done well for itself, and has done well in a financial sense, and has reached number 1 in a short time and no one noticed them doing this which is surprising. I wander what else, they will do to show their country has moved forward with time and the wages are good over there for the people to survive. America needs to have a good economy, one where everyone get's wages which they can survive on which has been a problem there for a long time. A new government is needed one with changes for the economy, and also one which makes economy etter.

China has the fourth surplus in the world if I'm not mistaken, it can pumps lots of cash to the market whenever it wishes to do so. Unlike the US sinking in deficit only God knows when they will be able have that removed off their shoulder.

SENIOR MEMBER

Absolutely. The same fate as the Soviet Union is awaiting the US, Their national debt has past the $18 trillion mark, no economy can survive that, And imagine if tomorrow we decided to sell our oil with a currency other than the Dollar? each and every state of their 50 states will start declaring their independence, not to mention that each state has its own armed militias, so if their economy collapsed = their military will collapse = eventually the whole country will collapse.

I live in state with some of biggest of these kind of militias. They are joke. Only thing matters to them is black president. Once republicans are back in power they could care less about police state.

NEW RECRUIT

I do not understand why or how, people think the term "america" means the USA or United States of America... it does not! America, means the whole continent of America, which is composed of North, Central and South America. The USA is "one nation" of people recognized as being part of the continent called America. So when I see people writing America this and that, and then imply the US or USA represent the whole of America, is a clear indication of their ignorance and arrogance! For example, China is not the whole of Asia, hence people do not write,"It's official, Asia is now number 2..." Yeah, it's grammatically retarded.

As for China, that nation has economic strength or influence only, but everything else those people do is far lacking behind the people of USA. China's economy has already been declining for a year or two now, and in my opinion, it ain't going to be the leader in the world economy too long.

MEMBER

I do not understand why or how, people think the term "america" means the USA or United States of America... it does not! America, means the whole continent of America, which is composed of North, Central and South America. The USA is "one nation" of people recognized as being part of the continent called America. So when I see people writing America this and that, and then imply the US or USA represent the whole of America, is a clear indication of their ignorance and arrogance! For example, China is not the whole of Asia, hence people do not write,"It's official, Asia is now number 2..." Yeah, it's grammatically retarded.

Firstly, I welcome you in this forum and I hope you have a good time with us .

I'm agree with you that America is totally different from USA , but in my observation the majority of people in Asia & Africa are using the word " America " instead of the word " USA" for many reasons such as language,cultures...

Being an Arabic I can tell you many of the Arabs using "America " because the main sources of informations (such as media ,newspapers,websites...etc) fixed this word in their minds. i.e. we hear in the media America and read in newspapers & books America so, the expected meaning of the USA is " America " ...

I hope you get my point (it's not purposed ! all that was cultural or linguistic mistake not to ignore or downplay the USA or other countries ).